How this calculation works
The comparison starts with today’s loan balance and calculates the EMI for the remaining tenure. One strategy spends available extra cash on principal and applicable charges; the other invests it. Both keep the same monthly budget. When a loan payment becomes smaller than that budget, the remainder is invested, including all freed EMIs after payoff. At the selected date, subtract remaining debt from investment value to compare net positions.
Worked example
This example uses illustrative inputs. Your current result is shown above.
A ₹1,20,000 loan at 0% over 12 months has a ₹10,000 EMI. With ₹60,000 available now, no surplus, no fee and 0% investment return, prepaying clears the loan in 6 months and invests the last six EMIs, producing ₹60,000. Investing the lump sum while paying the loan also finishes with ₹60,000 and no debt.
Assumptions and limits
- The outstanding balance is measured today before the next interest period. The loan uses a fixed annual nominal rate, monthly reducing-balance interest and its original scheduled EMI.
- The same lump sum and EMI-plus-surplus budget fund both strategies. Prepayment charges reduce the principal that the available cash can repay.
- Regular repayments happen at month-end, followed by any extra principal payment. Investments grow during the month; new monthly cash is invested at month-end.
- Unused surplus and freed EMIs are invested through the common comparison date. This continues after the original maturity on both sides, avoiding unequal household budgets.
- The optional yearly cap is a fixed percentage of today’s initial loan balance, resets at months 13, 25 and so on, and includes the initial prepayment in the first block. Cash blocked by the cap stays invested; it is not automatically withdrawn later.
- The fee and cap are manual planning assumptions, not a statement of current lender eligibility. Taxes, changing loan rates, lock-ins, emergency liquidity and investment volatility need separate consideration.
Questions people ask
Why does the prepayment strategy have an investment balance?
After early payoff, the money previously used for EMI is still available in the common monthly budget. It is invested through the comparison date. Cash that exceeds the loan balance or is blocked by your entered prepayment cap is also invested.
Are prepayment charges added on top of my surplus?
No. Principal repayment and its charge must fit inside the same available cash. For example, at an all-in 2% charge, ₹10,200 can fund ₹10,000 of extra principal and ₹200 of charges.
Can I compare only a lump sum or only a monthly surplus?
Yes. Set the unused input to zero. The original EMI remains in both household budgets, and the comparison still runs to the same selected month.
Does a higher projected investment balance make investing the better choice?
Compare investment value after subtracting remaining debt, and consider the uncertainty of returns, emergency cash needs, tax and lender restrictions. A constant investment return is a scenario assumption, not a forecast.